The Weekly Report is our summary of key indicators and recent events in the crypto world that professional traders are closely monitoring. This report and other relevant information are first shared via the official League of Traders Telegram channel.

Here are our notes for the third week of December!

1.Bitcoin Chart/Ethereum Chart
After hitting $44700 on Binance, the price of Bitcoin has continued to drop, now sitting at $41300. This is likely because major investors are taking profits from Bitcoin, which has risen significantly in a short period due to the spot ETF issue. This can be interpreted as a positive as they are taking profits and lowering their leverage ahead of the spot ETF approval scheduled for January 10th of next year. However, the chances of more rallying being sustained in the near term are not high unless we can break through the strong resistance near 45k. On the downside, 38k, which was the area of heavy volume before the rally, could be a supportive level.

BTCUSDT Chart (Binance)

Ethereum’s price has risen above $2400 and back down below $2200. The fact that Ethereum’s price has risen less than Bitcoin’s, and the expectation that an Ethereum ETF could be next after the approval of the Bitcoin ETF, suggests that Ethereum may not do as badly as Bitcoin. However, it’s important to note that unlike Bitcoin, Ethereum has big securitization issues and the futures market hasn’t stabilized, as Bloomberg analyst James Safdie points out, so Ethereum may trend differently from the approval of the Bitcoin ETF.

ETHUSDT Chart (Binance)

Bitcoin’s Dominance rose to 55% and then fell back down to 53%. A decline in Bitcoin’s dominance could lead to a bull market in altcoins, but for now, we are seeing a decline in dominance as altcoins and Bitcoin fall together. If Bitcoin’s dominance turns from bearish to bullish, we could see a short-term alt-market bull run.

Bitcoin dominance chart (CoinMarketCap)

2. Major Economic Indicators

US Bond Yields

At 3.928%, the U.S. 10-year Treasury rate fell below 4%. If the current slowdown in U.S. inflation continues, there is some speculation that the 10-year Treasury rate could fall to the mid-3% range next year. However, because rates have fallen so much in the short term, it’s important to keep in mind that it’s also possible that rates could taper off or rebound temporarily rather than fall much further.

US10YPrice Government Bond Rate (TradingView)

US Dollar Index

The U.S. dollar index is weaker in the U.S. at 102.544, with U.S. Treasury yields falling. The greenback could weaken further in the aftermath of the FOMC, which was more dovish than expected. The Bank of Japan (BOJ) Governor, Kazuo Ueda, recently spoke about ending its negative interest rate policy, raising expectations of monetary policy normalization. However, if the BOJ’s monetary policy meeting on the 18th did not include any comments on the removal of yield curve control (YCC) as expected by the market, the yen may weaken again. At that point, the dollar index may also see a short-term rebound, so watch out for that.

US Dollar Index (TradingView)

US100 (Nasdaq 100)

The Fed’s shift to a dovish tone last week kicked off an “everything rally” in US equities. The Nasdaq 100 is at an all-time high, with a strong breakout above the 16000 resistance level. US equities are likely to end the year with a rally as a continuation of these expectations.

US100 (TradingView)

Gold Futures

Gold futures have been correcting since breaking out to a record high of $2100 in early December, driven by deliveries that have felt the pressure of the highs. However, the gold market is a non-yielding asset that can thrive in a low-interest rate environment, and if rates are cut next year, it is likely to rally to new all-time highs once again.

Gold Futures (TradingView)

3. Bitcoin Market Data

MVRV Z-score

The MVRV Z-score is 1.42, a significant decrease from last week’s 1.61. However, it is still far from the overvaluation zone above 3 and is unlikely to fall to the undervaluation zone near 0 in the near term. Therefore, the current reading can be considered neutral.

Indicator explanation: The MVRV Z-score is a measure that determines whether Bitcoin’s market cap is overvalued or undervalued by dividing the difference between Bitcoin’s market cap and realized cap by the standard deviation. If the MVRV Z-score is below 0, Bitcoin can be considered to be undervalued. In the overheated market that reached the All-Time High (ATH) in 2021, scores of 6 or higher were shown.

Bitcoin: MVRV Z Score (Glassnode)

aSOPR

The aSOPR is at 1.007, a slight decrease from 1.018. It is still above 1, but if the downtrend continues, it may move below 1. This could signal a shift to a bear market in the near term, so you should continue to monitor the indicator to see if it stays above 1.

aSOPR is short for Adjusted Spent Outfit Profit Ratio, a value obtained by dividing the price of received bitcoin in the past by the price at the time of transmission. When SOPR is less than 1, it indicates a downtrend, and when it is above 1, it indicates an uptrend. aSOPR is a more accurate value that removes meaningless transactions within the hour for adjustments.

Adjusted SOPR (Glassnode)

Open Interest

At $9.67B, open interest in Bitcoin perpetual futures is down significantly from last week’s $10.7B, but still above the $9B mark. There has been a pattern this year of a correction every time open interest exceeds $9B, and that’s what we saw last week. While caution is warranted as open interest is still not at a completely low level, the likelihood of a collapse due to cascading liquidations is not high given that the combined estimated leverage ratio of exchanges dropped from 1.99 last week to 1.90 this week, the lowest in the measurement period.

Outstanding Open Interests by Exchanges (Glassnode)

Exchanges’ combined estimated leverage ratio (Glassnode)

4. On-chain data

Exchange inflows and outflows

Bitcoin positions on exchanges are close to neutral, with a slight outflow edge. At current price levels, this can be interpreted as a balance of institutional buying and selling by miners and others.

Bitcoin: Exchange Net Position Change (Glassnode)

Number of Whale Wallets

The correction in the price of Bitcoin has been accompanied by a further decline in the number of whale wallets holding 10K+ Bitcoin, which is now at its lowest point of the year. This suggests that large whales who bought Bitcoin at low prices have realized profits at the current price point. If we see the number of 10K+ whale wallets increase again, or at least hold steady, as the price drops, we can expect to see an upturn, indicating that short-term profit-taking is nearing completion. However, at the moment, we are seeing a downtrend and a decrease in the number of whale wallets, indicating that arbitrage is continuing.

Number of Bitcoin wallets holding 10K or more (Glassnode)

5. Last Week’s Major News

Binance drops to 30% exchange share

Binance, the world’s largest cryptocurrency (virtual asset) exchange, has seen its share of the cryptocurrency exchange market drop to 30%. According to CoinDesk US, the company’s spot market share has continued to decline this year. From January through September, Binance’s monthly spot trading volume dropped by more than 70%, from $474 billion to $114 billion. “Binance’s decline is likely due to a combination of increased competition and increased regulation across the industry,” the publication said. In addition to the CEO’s departure, Binance has seen several executives leave the company this year, including Chief Strategy Officer Patrick Hillman, General Counsel Hon Nguyen, Senior Director of Investigations Matthew Price, and Senior Vice President of Compliance Steven Christie.

Tether scores lowest in S&P stablecoin rating

Tether (USDT) received the second-lowest score of 4 in a global stablecoin stability assessment released by global credit rating agency Standard & Poor’s (S&P). According to CoinDesk US on Wednesday, S&P gave stablecoins a total score of 5 out of 5, taking into account stability, transparency, governance, and legal risk factors. A score of 1 indicates that a particular stablecoin is “very strong,” while a score of 5 indicates that it is “weak.” Tether is the world’s largest stablecoin, with a market capitalization of $90 billion, but S&P noted that the collateralization ratio of USDT issued by Tether is not transparent and could be subject to regulatory scrutiny.

Traditional Finance Expects Fed Rate Cut…Bitcoin Impact?

The US Federal Reserve (Fed) forecast a 75 basis point cut in interest rates next year in its recently released dot plot. The dot plot is a tool that represents the individual projections of Federal Reserve Board (FOMC) members on the path of interest rates, and the forecast is a significant upward revision from the 25 basis point rate cut forecast three months ago. U.S. stocks surged on the news, with the Dow Jones Industrial Average surpassing 37,000 points for the first time, according to CoinDeskUS on Thursday. In addition, the yield on the two-year U.S. Treasury note fell to 4.32%, indicating strengthening expectations of a rate cut among market participants.

6. Major economic events

Major economic events last week

Treasury yields fell sharply on Thursday morning after the US Federal Reserve (Fed) signaled a stronger-than-expected “dovishness” (favoring monetary easing). Fed Chairman Jerome Powell said in a press conference that “the benchmark interest rate appears to be at or near its peak in this tightening cycle,” and also revealed that there was some discussion at the meeting about when to start cutting rates. Specifically, as the dot plot below shows, several Fed members suggested three rate hikes from the current 5.3 rate cuts from the current rate of 5.25–5.50% to the 4.50–4.75% range next year, confirming the end of the tightening cycle. In response, U.S. stocks rose to new highs, but cryptocurrencies performed relatively poorly.

FED Dot Plot (Federal Reserve Board)

FED Dot Plot (Federal Reserve Board)

This week’s major economic events:

This week’s inflation data from the U.S. and Europe will be closely watched. If we see some stabilization in inflation this week, after last week’s dovish signal from the Fed, asset markets could see a year-end rally. Conversely, if the inflation data shows no sign of stabilization, it could provide data that could cause the Fed to shift from a dovish to a hawkish stance again early next year.

Major Economic Events for the 3rd week of December 2023 (Investing.com)

Summary

Positive indicators: U.S. bond rates, U.S. dollar index, Nasdaq 100, and leverage ratio for perpetual futures.

Negative indicators: Bitcoin price, Bitcoin Dominance, aSOPR, number of whale wallets

Overall Review: Currently, Bitcoin’s intrinsic variables such as its short-term trend, aSOPR, and whale wallet count, are negative. However, the macro environment, such as US interest rates, the US dollar index, and the stock market, are all positive for the price of cryptocurrencies. Therefore, while being flexible to short-term corrections, the focus should be on maintaining or increasing the allocation to cryptocurrencies in the medium to long term, given the positive macro environment, the approval of the spot ETF, and the Bitcoin halving issue.